05/31/2022 – In April and May, especially in the major US equity indices, we had to watch six or seven negative weeks in a row, which is nothing for stock owners with weak nerves. Crypto exchanges also entered a kind of capitulation phase, led by the bank run on one of the largest crypto ecosystems Terra (Luna) with its stablecoin USDT. Leading the way is the technology-heavy Nasdaq, which has lost about 26% year-to-date through May 23 and as much as about 31.4% since its all-time high. It takes a very long time to look back to find such a long negative phase without a countermovement. We have come across 1971, the period followed by stagflation and the great oil crises of the 1970s. Once again, the question arises as to what extent we are in a similar situation. At present, we do not believe that it is comparable. Because times have changed a lot. Back then, there were no technological leaps and no huge economies of scale like there are today. In addition, large companies and the private equity sector, but above all countries with trade surpluses or their sovereign wealth funds, are sitting on more cash than ever before. The fact that we are seeing a contraction in the economy, that inflation is higher than it has been for a long time, and that interest rates have risen but are still below inflation compensation, is not a new insight. Much of this is likely to already be reflected in prices. Following the end of loose money by the Federal Reserve, the market is seeking its new equilibrium. This process may take some time, and a recession in the US already seems to be priced in. If there is no threat of a global recession or even a world war (which we do not expect), the facts described above will eventually form a natural floor for the markets.
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